Ethical dilemma around kicking tenants out

[Erik Haugen]

I bought a 8-unit apartment building; the value add is that rents are 20% below market value. My strategy was to buy, let the tenants go, rehab, and raise the rents. We gave notice to all the tenants (who are month-to-month) to vacate. During the walkthrough I saw quite a scene where tenants were genuinely shocked that they would be moving out.

During coffee with a friend I mentioned what I am doing with this property. He was shocked and said "so this is what you do for money." I tried to rationalize that if I don't buy the building, someone else would and they would have done the same thing. I also tried to say something of the effect that this is the byproduct of a capitalistic society - should I feel bad about being a software engineer, for instance, because I know that machines one day could replace human labor? He maintained that he could have an opinion, and said that this is why rich people are hated by some. From the discussion, I can see that he thinks money corrupts the conscience, and pursuit of money is bad. From my perspective I told him that if I were just to be rich, I would not have done house hacking, live frugally, and drive an old car. I said financial freedom and not having someone direct me at work one day is important to me. 

I am new in my investing journey. I am asking for advice from experienced investors on what framework do you use to think about all the ethical dilemmas you face in your real estate journey. For instance here are some options; none is right / wrong, more important is I pick one and stick with it:  

1. I now embark on a journey that I would be hated by people simply because they are jealous and they don't understand the function of money the way I do, and I would accept that as part of my tradeoff. 

2. I would not invest in any apartment buildings where rent increase means kicking tenants out 

3. If the path to financial freedom means that some people lose their homes but it's done so in a most humane way (proper notice, empathy etc), so be it. 

Thanks for reading! 

[David Dey]

I am a Christian and do investments.  I love people, I enjoy this business.

I understand the issues on both sides.  The number one key to this business and faith, keep your word.

If you have decided to purchase a property renovate it, raise the rents... keep your word.

If you have signed a contract with your tenant promising to exchange housing in good order and repairs when necessary for rent paid on time on a monthly basis... keep your word.  

If your agreement says that if they don't pay their rent in a timely fashion that you will evict them from the premises... keep your word.

The most loving thing you can do is listen to the leading of the Lord.  And keep your word.  And do everything to the glory of God.

It could be that your raise in rent woke up a tenant who had gotten lethargic on moving forward and now with this wake up call, they are now opened up for a new blessing.  (Maybe home ownership.  Maybe they need to move from the area?  Who knows?)

You be obedient in your actions and let God take care of theirs.  (That is the most loving thing you can do)